The Reality of Coming Incompetency: The Period of Transition and its Problems

Introduction:

A client put it better than anyone else I know in an email to me: “The horrible thing is that part of the time he knows he is losing his mind, not all the time. When he actually does not know what is happening, he is at least not upset. But in those periods of lucidity, he is so upset. He knows it is coming again. He knows he can do nothing about it. And he becomes desperate and angry.”

Normally, one does not lose competency overnight. It is usually a process taking months or years and the transition to full incompetency is not always obvious to the average layperson. Denial of the true condition is often encountered both by the person suffering from the transition and the family. Often when a psychologist or expert advises the family that a family member is no longer rational or competent, it is a shock to hear the diagnosis. All of us forget things from time to time and it is typical to hear family members explain that mom or dad is just “forgetful.”

But legal incompetency goes far beyond that. Cornell Law School uses the following definition, which is useful:

Mental competency refers to a person’s ability to make rational decisions and express themselves. In the legal context, mental competency means a person’s capacity to understand the basic nature and purpose of court proceedings, his/her roles with respect to other parties in the courtrooms and possible legal consequences of his/her actions.

In the U.S. the laws presume that all adults are mentally competent to make decisions and to be responsible for their acts or decisions, which recognizes people’s capacity to understand the legal consequences of their actions. The party who challenges this presumption bears the burden to prove that a person is more likely than not to be mentally incompetent. The party who claims the person is mentally incompetent may ask the court to order a mental competency evaluation carried out either by psychologist or psychiatrist.

The mere diagnosis of a mental or physical disorder may not be sufficient in itself to support a judicial determination that a person is mentally incompetent. Courts usually take into consideration a totality of circumstances, including the frequency, severity, and duration of a person’s mental handicap.

The Mayo Clinic uses the following analysis:

What is mental health?

Mental health is the overall wellness of how you think, regulate your feelings and behave. Sometimes people experience a significant disturbance in this mental functioning. A mental disorder may be present when patterns or changes in thinking, feeling or behaving cause distress or disrupt a person's ability to function. A mental health disorder may affect how well you:

Maintain personal or family relationships

Function in social settings

Perform at work or school

Learn at a level expected for your age and intelligence

Participate in other important activities

Cultural norms and social expectations also play a role in defining mental health disorders. There is no standard measure across cultures to determine whether a behavior is normal or when it becomes disruptive. What might be normal in one society may be a cause for concern in another.

When do confusion and forgetfulness become extreme enough to become incompetency? When can you no longer expect a person to financially care for themselves or make financial decisions? That is a question of debate. The extremes are easy: a forty-five-year-old businessperson working hard and handling myriad issues with forethought and planning is clearly competent; a ninety-year-old person who does not recognize family members and does not know he or she is in a rest home is clearly incompetent. The problems occur between those two extremes.

And that grey area in between presents the greatest challenges. You do not want someone you love to be told they are no longer competent, with the anguish and despair that can cause. But you do not want your parents or uncle or aunt making financial decisions that can be disastrous or become prey to the financial predators who are out in the world. 

There are legal steps a family can take to minimize the financial and emotional risk of this transitional period and, as with so much family law planning, being proactive is key. Those steps are discussed in this article.

The Steps While Competency Remains at Least Some of the Time:

1. Having an up-to-date estate plan (trust or will), living will and both medical and asset durable powers of attorney are vital, and one should immediately review those documents to make sure they are up to date, still comply with what the person wants and, if not, updated. If none exist, they should be immediately prepared and executed. Time is critical. 
   1. When someone is beginning to transition to incompetency, there will be periods when they are not legally able to execute the above documents or will not know what they really want. There is no point in executing documents during those periods which may come and go. The doctor or psychologist treating the person should be consulted as to whether there are periods of lucidity in which that doctor would state they are competent enough to execute those documents. If so, the documents should be prepared and executed if and when the person is competent and done so before the situation worsens. 
      1. One may assume that others may later allege that the person was incompetent or under undue influence when such execution occurred. It is important to retain experienced counsel who will interview the person and the doctor to assure him or herself that competency exists, have the person sign the document after a voir dire that is videotaped, and have the actual execution videotaped. 
         1. The voir dire should ask various questions to demonstrate the person knows what they are doing, knows how they want their estate to be distributed and who is to be the executor and holder of the durable powers of attorney.
         2. The attorney should keep the video in a safe locale and make sure any notary used is easily reachable in case there is a later contest of the will.
         3. Normally, an experienced counsel will interview the person alone with the notary. No family member or heir should be there so that there is a question of undue influence.
2. Assuming that no doctor or psychologist will confirm competency or the chances of having the person during periods of lucidity have become too small, then one must simply use whatever documents are at hand and hopefully, those will include a durable power of attorney for asset handling and another durable power of attorney for medical care.  If none have been yet created, see if there is a way to have them quickly executed during a period of lucidity, but note you need a notary present for the execution of durable powers of attorney for assets and witnesses for the durable power of attorney for health.
3. Most durable powers of attorney only become effective when two doctors attest that the person is no longer competent to handle his or her affairs or medical decisions. It is important to get to know the doctors and meet with them so that they and you are familiar with the situation, and you can quickly contact them to invoke the durable power if incompetency occurs. There are articles on this site that discuss durable powers of attorney in detail. 
4. If there are no durable powers of attorney, you face a much more difficult set of tasks. One can go to court to have the court declare a person incompetent and to appoint a person to handle their affairs but that can be a truly upsetting hearing. The person has a right to counsel (which makes sense since they are losing the right to handle their own affairs and make their own decisions) and the process is prolonged, expensive, and can tear a family apart. It is vital to have a doctor and/or psychologist ready to testify as to the mental condition of the person and the court may appoint its own expert. Normally these steps are only taken when it seems very apparent that the person is no longer competent.
5. There are practical steps one can take outside a court of law. If one can bring the entire family together to act as one, then handling the finances and medical decisions can be a joint effort and if all, together, feel that the person is incompetent, then a hearing before the court will not be nearly as difficult. Remember, banks, financial institutions, doctors, lawyers, etc. will not let you make decisions for that person without a durable power of attorney in effect or a decision by the court that the person is incompetent. Thus, minus a durable power of attorney, one eventually must go to court to obtain that needed power.  Even before that happens, making sure the doctor, lawyer, stockbroker, and banker know there is an issue and if the person contacts them to contact you may avoid a great deal of turmoil later on.
   1. The problem is none of these professionals can follow your instructions without the needed legal documents. They can probably warn you that the person is making decisions that are not rational, but it is up to you to seek the appointment of a person in court.
   2. If practical, think about having several family members or a professional jointly hold the position of holder of the durable power or trustee. This moves the role beyond family dynamics and can reduce intra-family suspicion. The downside is that it may result in additional professional fees or a deadlock if an even number of family members are appointed. 
6. The better step is to wait until the person is in a rational period and immediately get that durable power of attorney signed. Have it already prepared and a notary on phone standby so that you can avoid the hearing if at all possible. Ideally, a videotape and voir dire are taken, but if that cannot be accomplished, at least get the durable power of attorneys signed. It may be challenged later but you will be arguing from a position of greater strength.
7. Note that the holder of a durable power of attorney has a fiduciary duty to the person, the highest duty under the law. One must not be in a conflict of interest or take any step that is harmful to the person. Failure to abide by that fiduciary duty can impose personal liability. 

The Sad Reactions That Are All Too Likely: 

It is often a heart-breaking series of events that can erode a family’s unity that ensue once incompetency becomes likely for a mother, father, etc. They can be predicted, and steps can be taken to minimize the chances that they will happen.

1. The Person Losing Competency Becomes Hostile and Paranoid.  One symptom of growing incompetency is a growing aggressiveness, hostility, and paranoia of the person suffering the loss of competency. This is not surprising. One realizes that the most critical aspect of one’s identity, the ability to take care of yourself, make your own decisions, and know what is happening, is declining and will eventually disappear. This can lead to anger, frustration, lashing out at family and friends, and fear that others are going to steal one’s assets or “put one away” in some institution. This can destroy family and friendship relations and becomes acute when one of the family insists that a durable power of attorney and/or new estate plan be signed.
2. Family and Friends Become Suspicious:  Even close-knit families can be disturbed when one sibling seeks to assume control of assets or the medical care of the person. Even if not immediately, over time one or the other family member will question certain decisions or ask what happened to a particular asset. This is exacerbated when the person who is in decline is paranoid and angry and reaches out to other children to complain about the actions of the holder of the durable power of attorney.
3. The Holder of the Durable Power Works Long Hours and is Blamed for Anything Wrong:  A holder of a durable power or a trustee is required by the fiduciary duty to be proactive in taking steps to protect the person in decline. While trustees can receive reasonable fees and if the durable power so allows, so can holders of durable powers of attorney, the fees seldom truly compensate the holder for the many duties and personal potential liability and many in the family will resent any fees being paid at all. This leads to resentment on the part of the holder of the durable power and further strains family relationships.
4. The Incompetent Person May Regain Competency and Demand Revocation of the Power:  As stated previously, incompetency can come and go, and it is not uncommon for the person afflicted to regain competency and immediately seek to regain past power. Most durable powers of attorney indicate that they become ineffective if two doctors now say the person has regained competency and may again be reimposed if two doctors later state that again it is lost. One good aspect of durable powers of attorney, if correctly written, is that they become effective when needed and can remain binding for the future even if at times they are not being used due to regaining competency.  However, during times of competency, the person afflicted can revoke all estate planning documents, including the durable power, which can cause chaos in asset protection.  This often occurs if one sibling influences the suffering person and states that the holder of the durable power was acting improperly.

The above problems can be minimized. Recognize that paranoia is often a symptom of the disease and do not overact to claims of wrongdoing. Explain patiently why you did something and be ready to explain over and over.  If family members are supporting you, it is vital to have them explain to the suffering person that you are doing your best for him or her. The more family members who will so indicate, the better. 

Keep very good records of all you do so that you can demonstrate what you have done.  You will need those records for tax reporting in any event.  Any truly major decisions should involve input from family members and if possible, achieve a consensus.  

Work closely with the doctors, lawyers, and psychiatrists so that if there is any challenge you have their expert backing and they can explain to the person and family members why you are doing what you are doing. 

Self-dealing in any way can not only expose one to a breach of fiduciary duty but will eliminate trust for all time. Before engaging in any transaction that can be argued to be self-dealing, get professional advice, and do not do so without such support.  Do not borrow money; do not use the incompetent to guarantee any transaction. Do not buy or sell any asset which could benefit you. Do not use an asset personally or for your own benefit. Make sure any fees taken are in line with local probate court standards. When in doubt, don’t do it. It can lead to years of litigation and the destruction of any remaining family feelings. 

Conclusion: 

It is clear from this analysis that the creation of an appropriate estate plan including durable powers of attorney while the person is competent is vital to avoid a great deal of tension and trouble. The sooner the better and ideally before the first sign of incompetency. As one client remarked, “It is important for me to realize that my most important sign of family love is to take care of business ahead of time. Otherwise, I leave a time bomb for my family.”

He was right.